Ag prognosis improves slightly, volatility remains: NAB

Grain Central, September 11, 2019

AGRIBUSINESS conditions across the country improved slightly in August 2019 on the back of a solid, late break in southern Australia.

The NAB’s third Agribusiness Banker Survey reveals national agribusiness conditions rose by nine index points, with conditions now proving positive in Western Australia, South Australia and Victoria, yet remaining negative in New South Wales and Queensland.

NAB Agribusiness customer executive, Neil Findlay, said while conditions rose slightly in the latest survey, the agribusiness conditions index measured -11, with more bankers reporting weak than strong conditions, taking into account serious concerns in NSW and to a lesser extent, Queensland.

“Seasonal conditions remain a key driver of the survey results and reflect a wide variation across the country. Conditions remain weakest in NSW as prolonged drought continues across most of the state,” Mr Findlay said.

“Western Australia’s performance has eased somewhat following last season’s bumper harvest, with rain now needed to ensure a reasonable winter crop.

“South Australia and Victoria reported the strongest conditions in August, reflecting the solid, if late, autumn break, strong lamb prices and signs of stabilisation in the dairy sector.”

The survey reveals one in five NAB agribusiness bankers saw weather conditions as having the largest bearing on customer confidence.

Other key issues included government policy and regulation, which slightly increased in importance following the election, business outlook and margin pressure.

“After a positive reading earlier this year, national agribusiness confidence fell to -2, with considerable variation between states,” Mr Findlay said.

“Victoria and South Australia saw improved confidence, both moving to positive readings, while Western Australia fell from high levels to a reasonable +43, positioning it as the most confident state in the survey.

“Queensland returned to a much more modest result, while confidence in NSW plummeted.

“This confidence has a direct correlation with our capital expenditure outlook, with Western Australia, South Australia and Victoria returning the most optimistic projections for agribusiness capital expenditure in the short term, while NSW’s outlook remains the weakest.

“Overall capital expenditure turned positive in this survey, measuring +1 – a result well in excess of the -26 recorded at the end of the 2018.”

Key business indicators remain mixed with trading conditions and profitability both improving, while employment weakened.

“In terms of industry performance, NAB agribusiness bankers identified that their strongest performing customers were in lamb and mutton, following by mixed cropping and livestock and wool,” Mr Findlay said.

“The strength in the sheep meat market on the back of record lamb prices has helped producers in this sector, but the National Trade Lamb Indicator has since retreated.

“After ranking first in the March Survey, wool’s drop in performance is reflective of cooling prices and further concerns around the US-China trade tensions, which remains a key risk for the sector.”

On an industry basis, conditions were strongest in lamb and mutton, followed by mixed wool, mixed cropping and livestock, and dairy remains the weakest performer.

Agricultural land prices are still tipped to increase over the coming 12 months, with a 0-5 per cent increase expected by around one-third of agribusiness bankers, although more bankers are becoming less optimistic.

Source: NAB

Click here to listen to NAB Agribusiness Customer Executive, Neil Findlay, and NAB Agribusiness Economist, Phin Ziebell, discuss the results of the August 2019 Agribusiness Survey.

The August 2019 NAB Agribusiness Banker Survey is available for download here (PDF).


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